With most any business or profession, the general public has often formulated a group of beliefs that are commonly held as fact. Some of these beliefs may be well deserved; others may be born out of an isolated incident or reflect past practices that are no longer in place.
In this week’s column, we thought we’d go through a few of the more common real estate myths and try to separate fact from fiction.
-When buying, working directly with the listing agent will help me get a lower price for the house.
Some buyers think that a seller can save money on real estate commissions if there is no buyer’s agent involved with the transaction. In reality, sellers have usually negotiated to pay a total amount of commission, regardless of whether one or two agents are part of the process.
If you don’t have a buyer’s agent representing you, it just means more commission for the listing agent. There can be exceptions, but in most cases, there’s nothing to be gained, and a lot to be lost, by not availing yourself of the expertise offered by a buyer’s agent.
-The higher I price my house, the more money I’m likely to get for it.
Pricing a house for sale is one of the most important, yet one of the most often bungled parts of a real estate sale. Some sellers think they’re building in extra negotiating room. But, overpricing your house right out of the gate almost always results in a negative impression by buyers, as well as agents, and that impression will ultimately depress the perceived value of your property.
Removing the stigmatization of being “overpriced” usually requires that you compensate with multiple price reductions, resulting in a lower sales price than would have been achieved if the house was reasonably priced from the start.
-If I look long enough, I’ll find the perfect house.
Unfortunately, there is no “perfect” house. Unless you have an unlimited budget, buying a house is a set of compromises. You might find a place that has the perfect lot, but the house isn’t everything you want it to be, or vice-versa.
So, unless you want to make house shopping a multi-year hobby, try to prioritize your needs and recognize there will be trade-offs. If you get 85 percent or more of everything you want, that’s doing pretty well.
-Working with a lot of real estate agents will improve my chances of finding the right house.
Some buyers go out there and fire up half a dozen real estate agents, thinking that the more agents they have beating the bushes, the better their chances will be in finding the right house at the right price.
First off, agents are all playing with the same deck of cards, since there’s only one multiple list system to draw listings from. There really aren’t any “secret” listings that can give certain agents the inside track.
Second, developing a close relationship with just one agent will allow that agent to more fully understand your real estate needs and wants.
And third, agents work on 100 percent commission, so be judicious about using their time if you’re not really serious about including them in a transaction to buy or sell.
-With all the information available on the Internet, I don’t really need a real estate agent.
It’s true that you can find just about anything on the Internet. We’re sure you can find detailed instructions on the web about how to remove your spleen. But, that doesn’t mean such a thing is necessarily a “do-it-yourself” kind of project.
There are many Internet sites that can help you locate possible homes to buy. But when it comes to negotiating a purchase, or making sure a transaction actually gets to settlement, a laptop will never replace a real live agent.
-In today’s market, it’s always a good idea to first lowball sellers.
Since we’ve been in a buyer’s market for some time now, many buyers think, “what the heck,” let’s throw a lowball offer in there and see if we get lucky.
If it’s a house you’re willing to walk away from, that may be fine. But, if it’s a house you really want, lowballing the seller might poison your ability to ultimately do a deal. When the initial offer is unreasonably low, sellers frequently get their back up, and they can become significantly less pliable when it comes to further price negotiations.
-Sellers should never take the first offer.
Every once in a while, we put a house on the market, and it gets an offer right off the bat. Even if that offer is a good one, sellers frequently start second-guessing themselves and are reluctant to take a contract that comes in quickly.
We can’t tell you how many times we’ve seen a seller turn down that offer, only to find (six months later) that it was the one they should have taken. A fast offer, for top dollar, doesn’t automatically mean you underpriced your house. You may have just been lucky to get someone, who wanted a place exactly like yours, was out there shopping right when you put it on the market.
-If I wait, the market will turn in my direction.
The only problem with this theory is that we’re in a very uncertain market, and trying to time the market is nearly an impossible thing to do. Since we’re in a period of transition, the chances that market conditions will appreciably change to benefit either buyers or sellers is very low.
In all likelihood, we will experience slow price appreciation, which will benefit sellers. But, along with that price appreciation, we will also have more homes come to market, something that will be to the advantage of buyers. As a result, neither side will find themselves in the driver’s seat over the foreseeable future.
-Real estate agents try to drive up home prices, so they will get paid more.
People know that agents get paid as a percentage of a property’s selling price. Consequently, it’s not unreasonable to assume that agents would have a vested interest in higher prices. That’s not really true.
If someone pays an extra $5,000 for a house, the additional commission for the agent will be less than $100. Plus, if an agent were to blow a deal apart by pressing for a few more dollars in the sales price, their commission would become zero. No agent is going to risk a $7,000 commission in hopes of making an extra hundred bucks. Besides, the market, seller motivation and comparable sales dictate prices, not agents.
-Now is a bad time to sell, or now is a bad time to buy.
You wouldn’t think that both of these could be true at the same time, but unless you’re an investor, they can be.
The reason is that houses aren’t purely a financial decision. It’s not like trading pork bellies. There are many other non-financial factors that can come into play. People get married; people get divorced; they have babies; any number of things can happen that may inspire you to buy or sell a home.
Waiting for the most favorable economic environment to do so, isn’t always possible. Saving a few extra dollars in a real estate transaction usually isn’t worth compromising the quality of your home life.
As we said, there are misconceptions that exist in every business. Real estate is no exception, and there are many more myths than the few we touched on here. Solid information is always a key to success in making good decisions. So, when it comes to real estate, make sure you’re dealing with reality, and not being misled by perceptions that are out of date with how the process works, or out of sync with what’s going on with the market.
Bob and Donna McWilliams are practicing real estate agents in Maryland with more than 25 years of combined experience. Their email address is McWilliams@BobDonna.com.